Tuesday, July 5, 2016

The expansion and Income inequality: finally clearing the low hurdle of the Bush expansion

 - by New Deal democrat

Emanuel Saez has published an update to his data showing how the benefits from this economic expansion have been distributed between the top 1% and the bottom 99%.  To cut to the chase, here's the table:

There's good news and bad news in the data.  The bad news is that average real income growth in this expansion so far has been poorer than even during the George W. Bush expansion (13.0% vs. 16.1%).  The good news is that the bottom 99% saw better real average income growth than during the Bush expansion (7.6% vs. 6.8%),  and received a bigger share of the benefits of income growth than during the Bush expansion (48% vs. 35%).

Neither one comes close to the 1990s tech expansion under Bill Clinton.

This is still pretty weak tea, since the 90th through 98th percentiles of income are included in that bottom 99%.

But it nevertheless probably means that the below graph from an article by Paulina Tcherneva, which compares income growth for the top 10% vs. the bottom 90%, and which I sometimes still see circulated, can be put to rest:

Tcherneva wrote at the time:
In the postwar period, with every subsequent expansion, a smaller and smaller share of the gains in income growth have gone to the bottom 90 percent of families. Worse, in the latest expansion, while the economy has grown and average real income has recovered from its 2008 lows, all of the growth has gone to the wealthiest 10 percent of families, and the income of the bottom 90 percent has fallen. Most Americans have not felt that they have been part of the expansion. We have reached a situation where a rising tide sinks most boats.
At the time it came out, I criticized the graph for comparing *entire* recoveries vs. the first 4 1/2 years of this recovery. 

I want to emphasize that I agree with the thrust of Tcherneva's argument, but it would be nice to see an update to see if the improvement in the lot of the bottom 99% includes more than the top 9% of that group.

In the meantime, it does appear likely that lower gas prices and a tightening job market have finally brought a little growth to the bottom 99%.